Regardless of rising optimism over growth in domestic macros, equity markets succumbed to external factors such as overnight decline in American stocks in Wall Street following new United States Federal Reserve chairman Jerome Powell’s first statement hailing the country’s flourishing economy that analysts say carried a clear message suggesting more than three interest rate hikes in 2018 calendar year.
Analysts see share prices falling and Treasury yields rising in the year ahead. The development triggered selling pressure spreading from the USA to other major exchanges in Asia-Pacific and elsewhere today.
The latest GDP growth projection for India by Moody’s at 7.6 per cent in FY 2018 coupled with estimated growth in foodgrain production and consumer price index linked inflation staying within the Reserve Bank of India’s charted trajectory could not salvage the two benchmarks ~ Sensitive Index of Bombay Stock Exchange and Nifty of National Stock Exchange ~ from dipping further for the second time in a row.
As the day’s negative cues out-weighed evolving positive fundamentals, the 30-scrip Sensex ended the day at 34,184.04 (-162.35) points down 0.47 per cent. The 50-stock Nifty was down 0.58 per cent ending at 10,492.85 (-61.45) points.
Nifty Bank that led the downfall closed 1.09 per cent down at 25,107.40 (-276.20) points. Nifty PSU Bank that was trading in deep red recovered on sheer short-covering in late deals to end in green at 3,078 (+21.60) points gaining 0.71 per cent. In Sensex five shares were up and 26 down. For Nifty the ratio was was 21:29.
Dalal Street analysts say the slight moderation in the Purchasing Managers Index or PMI for February to 52.1 from 52.4 in January confirms Reserve Bank of India’s fear duly expressed in the minutes of Monetary Policy Committee meeting that consumer price index inflation may see elevated risk in coming the months.
Comments released with latest PMI data says: “Cost inflation accelerated to the sharpest since February 2017 adding to expectation that inflation risk will continue over the coming months. Factory activity slowed to a four-month low as new orders eased and weighed on output after manufacturers raised prices at the fastest rate in a year.
Retail to pick up in the months ahead forcing RBI to raise its policy repurchasing or repo rate.” Analysts see the central bank becoming more hawkish after fiscal slippage in the government’s management of economy became more pronounced after the fresh estimates were out minutes before the marked closed for the day.
The buzz in Dalal Street suggests that the government using central agencies appears all set to go hammer and tong against fiscal offender which became clear from this morning’s arrest of Mr Karti Chidambaram, son of former finance minister, for alleged money laundering in a media house transaction.
Equity and currency markets are rife with speculations that the crackdown would lead to more arrests in the weeks ahead. Before the day’s start to business in Dalal Street, traders were expecting recovery in benchmarks basing their optimism on ratings agency Moody’s latest report on global economic growth that contains laudatory reference to India’s economic recovery.It projects GDP at 7.6 per cent in 2018 calendar year.